WASHINGTON — House Speaker Kevin McCarthy said Tuesday that a federal debt deal with President Joe Biden is needed by next week if Washington hopes to avert a catastrophic national default as a June 1 deadline nears when money could run short for paying America’s bills.
Speaking ahead of a high-stakes meeting with Biden and other congressional leaders at the White House, McCarthy said he sees no reason why all sides can’t come to an agreement quickly over Republican ideas for cutting spending in exchange for raising the debt limit.
“I don’t think it’s that difficult,” McCarthy told reporters at the U.S. Capitol.
Biden and the Democrats don’t see it that way. The president is insisting that raising the debt limit is nonnegotiable, and with spending restraints addressed separately as part of the annual budget process.
All sides were meeting at the White House on Tuesday afternoon with the government at risk of being unable to meet its obligations as soon as June 1, raising the specter of economic chaos. The chasm between these opposite postures is fomenting uncertainty that is already roiling financial markets and threatens to turn into a tidal wave that swamps the country’s economy.
From the White House, Press Secretary Karine Jean-Pierre also said the issue could be “easily resolved.”
Biden’s Oval Office meeting with McCarthy, House Democratic leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell was set to begin after U.S. financial markets closed for the day.
Republicans are hoping to negotiate far-reaching cuts to federal spending in exchange for allowing new borrowing to avoid default. Biden, on the other hand, is set to reinforce his opposition to allowing the country’s full faith and credit to be held “hostage” to negotiations — and to affirm his willingness to hold talks on the budget only after default is no longer a threat.
“There’s no reason why our country should be drifting toward a crisis,” said McConnell, who has let McCarthy take the lead in negotiations and backed him up ahead of the White House meeting. “President Biden needs to negotiate on spending with Speaker McCarthy.”
House Republicans recently passed a sweeping bill to slash spending, an opening offer in negotiations. But that legislation has no chance in the Democratic Senate and the White House had already threatened to veto it.
Referring to House bill, McCarthy said, “We both said default is not an option — but only one of us took action.”
Expectations for a breakthrough were low.
Default, officials say, would have sweeping impacts, threatening to disrupt Social Security payments to retirees, destabilize global markets and tilt the nation into a potentially debilitating recession.
Treasury Secretary Janet Yellen acknowledged the “very big gap” between Democrats and Republicans in an interview Monday with CNBC. Biden, she said, was not willing to discuss compromises with “a gun to the head of the American people and the American economy.”
Already looking past the meeting, Biden on Wednesday is to go to Westchester County, New York, where he plans to deliver a speech on how proposed spending cuts approved by House Republicans could hurt teachers, older adults needing food aid and veterans seeking health care.
It’s part of a broader campaign by Biden to try to paint the Republican cuts as draconian. Aides believe that message both strengthens his position in talks with the GOP and boosts his nascent 2024 reelection effort. His Wednesday visit will be to a congressional district won by Biden in 2020, but that is now represented by a Republican, Rep. Mike Lawler.
Though Biden is traveling to the area to lambaste House Republicans, Lawler said in an interview Tuesday that he accepted the invite from the White House — “maybe to their surprise” — to appear alongside the president at Westchester Community College.
“He’s coming to my district, specifically to talk about the most pressing issue,” Lawler said. He stressed that Biden, McCarthy and Schumer have to negotiate on a deal that would curb spending and avoid default.
Because the House Republican bill does not specifically spell out which federal programs would be cut, Democrats have gone on offense warning of steep hits to popular programs. The Democratic-aligned group House Majority Forward announced a $1 million campaign Tuesday amplifying such cuts, while the House Republicans’ campaign committee countered with its own effort portraying Democrats as “addicted to spending.”
While calling for a “clean” increase to the debt limit, Biden has said he is open to discussion about how to reduce the federal deficit. His budget plan would trim deficits by nearly $3 trillion over a decade, mainly through tax increases on the wealthy and changes such as letting the government negotiate over prescription drug prices.
By contrast, the bill that passed the House with Republican votes would achieve $4.5 trillion in deficit savings through cuts in spending, eliminating tax breaks for investing in clean energy, and reversing Biden’s plans to reduce the burdens of student loan debt.
McCarthy, R-Calif., has staked his speakership on extracting concessions from Biden in exchange for raising the borrowing limit, with some of his members insisting they would withhold their votes on a debt measure unless all of their proposals made the final legislation.
While the financial markets have started to show some jitters, the business community has thus far largely avoided backing either side in the showdown and instead called for a deal to be struck.
“Securing a bipartisan path forward to raise the debt ceiling could not be more urgent,” said Josh Bolten, the head of the Business Roundtable, a group that represents CEOs. “The cost of a default, or even the threat of a default, is simply too high.”
The U.S. Chamber of Commerce suggested its own priorities for a swift deal Tuesday, saying “there are no two better places to start than permitting reform and an agreement on spending caps.”
Biden’s refusal to negotiate on the debt limit is informed by his first-hand experience in 2011, when he was Barack Obama’s vice president and the administration made painful concessions to Republicans in an effort to avoid default. Biden has told aides it’s an experience he refuses to repeat, not just for himself, but for future presidents.
“There is no Plan B,” Bharat Ramamurti, deputy director of the National Economic Council at the White House, told CNN on Monday. “Our plan is for Congress to act to address the debt limit, without conditions.”
Notably, though, the administration has not ruled out a short-term increase in the debt limit that would align the deadline to increase federal borrowing authority with the talks on government spending that must be resolved by Sept. 30.
Though memories of the 2011 debt-limit standoff — which also featured a Democratic president and a Republican speaker — remain fresh in minds across Washington, aides to McConnell, the Senate GOP leader, have started to point to another, more recent battle as a more instructive example.
In 2019, then-President Donald Trump and Nancy Pelosi, then the newly reinstalled Democratic House speaker, reached a broader fiscal deal that not only raised the nation’s borrowing authority for two years but staved off automatic budget cuts that both parties deplored.
McConnell implored Trump at the time to negotiate directly with Pelosi and House Democrats, aides said — and the two parties were able to push off the prospect of a debt default beyond Trump’s presidency despite political turmoil elsewhere.